Fact Sheet
How much will you
need for retirement?
One of the most important superannuation questions is how
much you’ll need for a ‘comfortable’ retirement. Of course, this
will vary depending on your own personal situation but to give
you an idea, you can use these three basic steps as guide.
It’s important to remember that this is only a guide and you may need more or less than this amount
to fund your retirement.
Step 1: Apply the ‘60% rule’
As a guide, a ‘comfortable’ retirement for most people means
receiving at least 60% of their current annual income in
retirement. Naturally, this will vary from person to person
but it’s a reasonable rule of thumb. The table shows what the
‘60% rule’ means at various salary levels.
Current income
60% of current income
$90,000
$54,000
$70,000
$42,000
$50,000
$30,000
Step 2: Convert this figure
to an equivalent lump sum
So how much do you need as a lump sum to produce an
annual income in retirement of, say, $42,000? Well,
Mercer Human Resource Consulting1 has calculated
that for a 60 year-old male, every $100,000 of after-tax
superannuation lump sum benefits produces a fixed annual
income of $8,794 for 20 years. So looking at the table, you
can see that a 60-year old male will need a lump sum of
almost $500,000 to provide an annual income in
retirement of $42,000 for 20 years.
These calculations are based on a 20-year time frame
because the approximate life expectancy for Australian males
is 84 years and 88 for females. So if you plan to retire at 65,
you should plan for your retirement savings to last around
20 years if you’re a male and longer if you’re a female.
Naturally, the more lump sum savings you have, the higher
annual income can be provided.
A little bit extra now can
make a big difference in
your retirement
Lump sum savings
Annual income
Timeframe
$100,000
$8,794
20 years
$200,000
$17,588
20 years
$300,000
$26,382
20 years
$400,000
$35,176
20 years
$500,000
$43,970
20 years
Note: These amounts are indicative only. They have been calculated by
Mercer Human Resource Consulting Pty Ltd (Mercer) ABN 32 005 315
917 based on an expected investment return of 6.5% pa. No allowance
has been made for fees. The allowance made for CPI is 2.5% pa.
1
Of course, many Australians are able to supplement their
superannuation with a part or full age pension. This means that
a combination of a superannuation income stream and an age
pension entitlement will still enable a reasonable life style in
retirement even if you don’t have a lump sum of this size. The
important thing is to make your retirement savings a priority.
Module 5.36 | Preparing | How much will you need for retirement?
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Fact Sheet How much will you need for retirement?
Step 3: Bridge the gap
Getting your super on track
Step 3 is to calculate how much you’ll need to save to close
this gap. The answer depends on things like your salary, how
much you’ve saved already, your age, and the performance
of your investments. To give you an idea, we’ve used the
superannuation calculator on the Australian Securities and
Investments Commission (ASIC) website to show how much
you may accumulate after 20 years at certain contribution
levels based on the assumptions shown.
These examples use the superannuation calculator on
ASIC’s MoneySmart website at www.moneysmart.gov.au.
The graph shows how contributing a bit extra
can make a big difference to your final lump sum
Account balance
$
$450,821
450,000
$324,827
300,000
250,000
Think about how your money is invested. Over the longer
term, more conservative investment options like fixed interest
and cash tend to earn lower returns than growth assets like
shares and property. Of course, your investment timeframe is
also very important, so you need to think carefully about your
investment decision. It might help to seek financial advice.
Another way to build your super is to add some of your own
money. If you are employed, and earning more than $450 per
month, your employer will already be making the required
contributions to your super, but this might not be enough.
Depending on when you retire, your savings may need to last
20 years or more!
How do I make a contribution to my super?
If you would like to make an after-tax or salary sacrifice
contribution, simply complete the Contributions by
payroll deduction form and give it to your employer. You
can download this form from our website or call us on
1300 650 873 to request a copy.
400,000
350,000
Now that you’ve established where you need to be, the
next step is to make it happen. If you think you might have a
shortfall, there are some simple things you can do now to get
back on track.
$240,831
200,000
Tip
150,000
100,000
50,000
0
9.5% SG only
9.5% SG
plus $2,000
(net) a year
9.5% SG
plus $5,000
(net) a year
If you’re uncertain about how much or what type of
contribution you should make, use our contributions
calculator to see the difference between making salary
sacrifice and personal after-tax contributions. Go to
firststatesuper.com.au/ContributionCalculator
Assumptions
55Salary: $50,000 pa
55Starting balance: $20,000
55Investment term: 30 years
55Management costs: 0.5% pa
55Investment earnings: 7.3% pa
55Earnings tax: 15%
55Insurance premiums: $100 pa
55Rise in cost of living: 2.5%
55Rise in living standards: 1.0%
The examples rely on the default information shown on the Money Smart
website at www.moneysmart.gov.au/tools-and-resources/calculatorsand-tools/superannuation-calculator. The assumptions do not reflect
the returns or fees and costs for First State Super and the fees for First
State Super differ from the amounts used in these examples. Please
see the current Product Disclosure Statement for the First State Super
product you currently hold for more details. You should also click ‘How it
works’ when you are using the Money Smart superannuation calculator
for information about the calculator and the underlying assumptions.
The examples are illustrative only and are based on the assumptions
listed. They should not be taken as an estimate or guarantee of the
superannuation benefits you may receive from First State Super nor are
they intended to convey any forecasts of future performance of the fund
or its investment options.
We’re here to help!
Super can be quite complicated and sometimes you just
want to know that you’re making the right decisions.
Because the right decisions about your super can make a
real difference to your financial future.
So if you’ve got any questions, or you just want the comfort
of knowing you’re on the right track, why not give us a call?
We can answer simple questions over the phone, or if your
situation is more complex, we can prepare a full financial
plan. It’s all up to you, no obligation, just call 1300 650 873.
Financial planning advice is provided by First State Super Financial
Services Pty Limited ABN 37 096 452 318, AFSL 240019.
Phone 1300 650 873
Fax 1300 722 072
Email [email protected]
Web firststatesuper.com.au
Post PO Box 1229
Wollongong NSW 2500
This is general information only and does not take into account your
specific objectives, financial situation or needs. You should consider
the Member Booklet (Product Disclosure Statement) for the product
you hold or intend holding before making any decisions. Call us on
1300 650 873 for a copy, free of charge, or visit firststatesuper.com.au.
FSS Trustee Corporation (FTC) ABN 11 118 202 672, AFSL 293340, the
trustee of the First State Superannuation Scheme (First State Super)
ABN 53 226 460 365.
Module 5.36 | Preparing | How much will you need for retirement?
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M5.36_HOWMUCH_04/16
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